In News:

• The Organisation for Economic Co-operation and Development (OECD) has released the “Global Drought Outlook 2025”, presenting a stark warning about the increasing frequency, severity, and impact of droughts worldwide.
• The report, titled “Global Drought Outlook: Trends, Impacts and Policies to Adapt to a Drier World”, offers a comprehensive assessment of drought patterns, consequences, and adaptation strategies, making it crucial for policymakers and global environmental governance.

Understanding Drought:

Drought is defined as a hydrological imbalance, characterised by prolonged periods of “drier-than-normal” conditions that deplete soil moisture, surface water, and groundwater. The report identifies three main types:

• Meteorological Drought: Caused by significantly below-average rainfall over an extended period.
• Agricultural Drought: Occurs when soil moisture becomes insufficient for crops and vegetation.
• Hydrological Drought: Involves declining water levels in rivers, lakes, and aquifers, affecting supply for human and ecological needs.

Global Trends and Projections

• Drought-Affected Land: The share of global land experiencing drought has doubled since 1900, driven by climate change and unsustainable land use.
• Current Impact (2023): Nearly 48% of the world’s land experienced at least one month of extreme drought.
• Regional Hotspots: Western USA, South America, Europe, Africa, and Australia are increasingly vulnerable.
• Groundwater Stress: Around 62% of monitored aquifers show declining trends.
• Future Risk: At +4°C global warming, droughts could become 7 times more frequent and severe by 2100, posing systemic global threats to food, water, and economic security.

Multidimensional Impacts of Drought

Ecological:

• 37% of global soils have dried significantly since 1980.
• River and groundwater depletion are threatening biodiversity and ecosystem services.

Economic:

• Drought-related losses are increasing by 3–7.5% annually.
• Modern droughts are twice as costly as in 2000; costs may rise 35% by 2035.
• Agriculture is most affected: crop yields drop up to 22% in drought years.
• Drought causes a 40% drop in river-based trade and a 25% decline in hydropower output.

Social:

• Droughts account for 34% of disaster-related deaths, though only 6% of disasters are droughts.
• It is a major driver of food insecurity, internal displacement, and climate migration, especially in Sub-Saharan Africa.
• Political instability and conflict often correlate with drought-induced resource scarcity.

Adaptation and Mitigation Strategies

The OECD emphasizes a multi-sectoral approach to manage drought risks:

• Integrated Water Resource Management (IWRM):
  • Balancing water use and renewal.
  • Promoting efficient and equitable water allocation.
• Nature-based Solutions (NbS):
  • Urban de-sealing to enhance groundwater recharge.
  • Landscape restoration to improve water retention and ecosystem resilience.
• Sustainable Agriculture:
  • Adoption of drought-resistant crops and micro-irrigation systems.
  • Can reduce water use by up to 76%.
• Urban Planning: Permeable infrastructure restores aquifers (e.g., US examples show 780 million m³/year recovery).
• Early Warning Systems: Enhanced drought monitoring, forecasting, and risk mapping.
• Policy Integration: Embedding climate resilience into national water and land-use policies.
• Cross-Sector Coordination: Engaging sectors like agriculture, energy, transport, construction, and health.
• Economic Benefits: Every $1 invested in drought resilience yields $2–$10 in benefits.

In News:

• In 2023, the Organisation for Economic Co-operation and Development (OECD) revealed that Indian farmers faced the highest implicit taxation globally, amounting to USD 120 billion.
• Implicit Taxation: This taxation arises from government policies like export bans, duties, and price controls, aimed at lowering food prices for consumers but reducing the income of farmers.
• Export Restrictions: Key commodities affected include rice, sugar, onions, and de-oiled rice bran.

Impact on Indian Farmers

• Market Price Support (MPS):
  • Negative MPS: In 2023, Indian agricultural policies resulted in a negative MPS of USD 110 billion.
  • Farmers received lower prices than international market rates due to export bans and trade restrictions, impacting their income.
• Budgetary Support: Despite government subsidies and the Minimum Support Price (MSP) worth USD 10 billion, negative MPS outweighed positive support, leading to an overall loss for farmers.
• Farmer’s Share in Global Negative Support:
  • India’s share of global negative price support in 2023 was 62.5%, a significant increase from 61% in 2000-02.

Global Agricultural Policy Trends

• Global Support: Total support for agriculture across 54 countries averaged USD 842 billion annually (2021-2023). However, there was a decline in support in 2022-23 from the pandemic-era peak.
• Challenges:
  • Geopolitical Tensions (e.g., Russia-Ukraine war) and climate change are exacerbating global agricultural production and trade.
  • Export Restrictions in various countries are distorting international agricultural markets.
  • Farmer Protests across countries reflect the economic and social struggles of the farming community.
• Sustainability Issues: Global agricultural productivity growth is slowing, posing challenges to feeding a growing population sustainably.

India's Agricultural Policies

• Export Bans and Restrictions: These policies are intended to control domestic prices but undermine farmers’ income by lowering market prices for key agricultural products.
• Minimum Support Price (MSP): MSP is meant to protect farmers, but is often set below international market rates, leading to a negative price effect.
• Regulatory Constraints: Policies like the Essential Commodities Act (1955) and APMC Act (2003), though aimed at ensuring food security, often lead to price suppression for farmers.
• Price Depressing Policies: India's agricultural policies result in lower farm-gate prices due to price controls, government-set procurement prices, and lack of market access.

Negative Market Price Support (MPS)

• Historical Trends:
  • From 2014-2016, India’s Producer Support Estimate (PSE) was -6.2%, driven mainly by negative MPS (-13.1%).
  • The PSE measures the annual value of transfers to farmers, both from consumers and the government.
• Inefficiencies:
  • Infrastructure Gaps: Poor infrastructure and high transaction costs lower the prices farmers receive.
  • Inefficient Resource Allocation: Short-term subsidies for inputs (fertilizers, irrigation) don’t address long-term agricultural challenges like climate change and market access.

Government Support Programs

• Subsidies and Schemes:
  • National Mission on Sustainable Agriculture (NMSA)
  • Paramparagat Krishi Vikas Yojana (PKVY) for organic farming.
  • Rashtriya Krishi Vikas Yojana (RKVY) to promote agricultural development.
  • Digital Agriculture Mission and Unified Farmer Service Platform (UFSP) for modernizing agricultural practices.
• Sustainability Efforts:
  • The government has introduced initiatives like AgriStack and Mission Organic Value Chain Development in the North East to enhance sustainable agricultural practices and reduce the negative impacts on farmers.

Global Context and Recommendations

• Environmental Public Goods Payments (EPGP): Only 0.3% of total producer support is dedicated to environmental sustainability, despite the growing need for climate-resilient agriculture.
• Sustainable Agricultural Practices: The OECD advocates for governments to tie producer support to sustainable farming practices, including the use of metrics like Total Factor Productivity (TFP) and Agri-Environmental Indicators (AEIs).
  • TFP measures agricultural efficiency, while AEIs assess the environmental impacts of farming.

OECD Overview

• OECD Function: Founded in 1961, the OECD is an international organization of 38 countries that promotes prosperity, equality, and well-being through economic reports, data, and policy analysis.
• India’s Role: India has been an OECD Key Partner since 2007, engaging with the OECD on various policy issues, though it is not a member.